Cap rates in Cleveland for large Multi Family

[Vic Delgado]

Hi everyone, what are current cap rates in Cleveland for B-C area large multi family properties (greater than 100 units) in the Edgewater area west of Cleveland? 

Vic Delgado

[Art Perkitny]

@Vic Delgado

Difficult to say without looking at a buildings financials, but that being said it's possible to approximate using public data.

I first pull the Cleveland parcel data-set from the Cuyahoga County Open Data website.

I then filtered down by number of dwelling units greater than or equal to 5 and with a recorded transfer of ownership in  Jan 2018 or later

The reason I chose 5 unit is because the number of buildings with 100 or more units is very small, and we need a sufficient sample size to get meaningful results. 

I then associated each parcel with a census tract to get the census reported median gross rent for each property. 

Lastly, I computed the cap rate by taking the monthly median rent, multiplying it by 12 and again by 50% (imputing 50 percent operating expense ratio). I then divided this by the reported sale price of the property. 

This is what resulted:

High Res Link

As you can see, Multi-Families in the Edgewater neighborhood seem to command a cap rate of around 10.4%.

This is based on buildings with 5 or more units, so the cap rate may differ at the 100 plus unit level. 

I did wash the data for obvious outliers, such as derelict buildings that were purchased for next to nothing and likely don't have a current certificate of occupancy. 

I think this should give you a better idea of what the expect in Edgewater as well as give you a snapshot of the Cleveland as a whole. 

Hope this helps!